[Congressional Record Volume 167, Number 187 (Monday, October 25, 2021)]
[House]
[Pages H5848-H5850]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




             FINANCIAL EXPLOITATION PREVENTION ACT OF 2021

  Ms. WATERS. Mr. Speaker, I move to suspend the rules and pass the 
bill (H.R. 2265) to amend the Investment Company Act of 1940 to 
postpone the date of payment or satisfaction upon redemption of certain 
securities in the case of the financial exploitation of specified 
adults, and for other purposes, as amended.
  The Clerk read the title of the bill.
  The text of the bill is as follows:

                               H.R. 2265

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Financial Exploitation 
     Prevention Act of 2021''.

     SEC. 2. REDEMPTION OF CERTAIN SECURITIES POSTPONED.

       (a) In General.--Section 22 of the Investment Company Act 
     of 1940 (15 U.S.C. 80a-22) is amended by adding at the end 
     the following:
       ``(h) Requirements With Respect to Non-institutional Direct 
     At-fund Accounts.--
       ``(1) Election.--
       ``(A) In general.--A registered open-end investment company 
     and a transfer agent described under paragraph (2) may elect 
     to comply with the requirements under paragraph (2) and 
     subsection (i) by notifying the Commission of such election.
       ``(B) Effect of election.--Paragraph (2) and subsection (i) 
     shall only apply to a registered open-end investment company 
     and a transfer agent that have made the election under 
     subparagraph (A).
       ``(2) Requirements.--In the case of a customer who is a 
     holder of a non-institutional account held directly with a 
     registered open-end investment company and serviced by a 
     transfer agent (a `direct-at-fund account'), the company and 
     transfer agent shall--
       ``(A) request from such customer the name and contact 
     information of at least one individual who--
       ``(i) is at the time of such request an adult; and
       ``(ii) may be contacted with respect to such account;
       ``(B) document and retain the information received pursuant 
     to subparagraph (A); and
       ``(C) disclose to such customer in writing (including 
     through electronic delivery) that such company or transfer 
     agent may contact an individual specified pursuant to 
     subparagraph (A) with respect to the account of such customer 
     to--
       ``(i) address possible financial exploitation of such 
     customer;
       ``(ii) confirm the contact information or health status of 
     the customer; or
       ``(iii) identify any legal guardian, executor, trustee, or 
     holder of a power of attorney of the customer.
       ``(i) Redemption of Certain Securities Postponed.--
       ``(1) In general.--Notwithstanding subsection (e), a 
     registered open-end investment company or a transfer agent 
     acting on behalf of such company may postpone the date of 
     payment or satisfaction upon redemption of any redeemable 
     security in accordance with its terms for more than seven 
     days after the tender of such security to such company or its 
     agent designated for that purpose for redemption if such 
     company or agent reasonably believes that--
       ``(A) the redemption is requested by a security holder who 
     is a specified adult; and
       ``(B) financial exploitation has occurred, is occurring, or 
     has been attempted with respect to such redemption.

[[Page H5849]]

       ``(2) Duration.--
       ``(A) In general.--Except as provided in subparagraphs (B) 
     and (C), a registered open-end investment company or a 
     transfer agent acting on behalf of such company may postpone 
     the date of payment or satisfaction upon redemption of a 
     redeemable security under paragraph (1) for a period of not 
     more than 15 business days.
       ``(B) Extension upon determination of exploitation.--The 
     period described in subparagraph (A) may be extended by an 
     additional 10 business days if the registered open-end 
     investment company or a transfer agent acting on behalf of 
     such company--
       ``(i) reasonably believes that--

       ``(I) the redemption is requested by a security holder who 
     is a specified adult; and
       ``(II) financial exploitation has occurred, is occurring, 
     or has been attempted with respect to such redemption;

       ``(ii) subject to subparagraph (D), not later than 2 days 
     after making a determination under clause (i), notifies the 
     individuals specified by such security holder under 
     subsection (h)(2)(A) in writing (including through electronic 
     delivery) of the extension of the period described in 
     subparagraph (A) under this subparagraph and the reason for 
     such extension;
       ``(iii) initiates an internal review of the facts and 
     circumstances relating to the determination under clause (i);
       ``(iv) holds amounts related to the delayed payment or 
     satisfaction upon redemption of the redeemable security in a 
     demand deposit account; and
       ``(v) documents and retains records related to carrying out 
     clause (iv) and includes such records in the first required 
     account statement of the security holder provided after the 
     date on which the determination is made under clause (i).
       ``(C) Extension by government.--A State regulator, 
     administrative agency of competent jurisdiction, or court of 
     competent jurisdiction may extend the period described in 
     subparagraph (A).
       ``(D) Notification.--
       ``(i) Exception.--Subparagraph (B)(ii) shall not apply if a 
     registered open-end investment company or transfer agent 
     acting on behalf of such company reasonably believes that an 
     individual required to be notified under such subparagraph 
     is, has been, or will subject the security holder who 
     identified such individual under subsection (h)(2)(A) to 
     financial exploitation.
       ``(ii) Reasonable efforts.--An open-end investment company 
     or transfer agent acting on behalf of such company shall be 
     considered in compliance with subparagraph (B)(ii) if such 
     company or transfer agent makes a reasonable effort to 
     contact the individuals specified by a security holder under 
     subsection (h)(2)(A).
       ``(E) Internal procedures.--An open-end investment company 
     or transfer agent acting on behalf of such company shall 
     establish procedures to carry out the requirements under this 
     subsection, including procedures--
       ``(i) related to the identification and reporting of 
     matters related to the financial exploitation of specified 
     adults;
       ``(ii) to determine whether to release or reinvest delayed 
     redemption proceeds, taking into account the facts and 
     circumstances of each case, should the internal review under 
     subparagraph (B)(iii) support the reasonable belief described 
     in subparagraph (B)(i);
       ``(iii) identifying each employee of the company or 
     transfer agent with authority to establish, extend, or 
     terminate a period described in paragraph (1) or subparagraph 
     (A);
       ``(iv) in the case of a transfer agent, that are reasonably 
     designed to ensure that the employees of such transfer agent 
     comply with this subsection; and
       ``(v) in the case of an open-end investment company, 
     establishing periodic reporting requirements under which a 
     transfer agent acting on behalf of such company shall notify 
     such company of--

       ``(I) each extension under subparagraph (B) authorized by 
     such transfer agent;
       ``(II) each finding by the transfer agent under 
     subparagraph (B)(i);
       ``(III) each notification under subparagraph (B)(ii) 
     carried out by such transfer agent; and
       ``(IV) the results of each internal review initiated by the 
     transfer agent under subparagraph (B)(iii).

       ``(F) Information included in certain statements.--An open-
     end investment company shall include in each prospectus or 
     statement of additional information a notification that the 
     company or transfer agent acting on behalf of such company 
     may postpone redemption of certain securities under this 
     subsection.
       ``(G) Record retention.--An open-end investment company or 
     transfer agent acting on behalf of such company shall--
       ``(i) document and retain records of--

       ``(I) each postponement of redemption under subparagraph 
     (A), (B), and (C);
       ``(II) each finding under subparagraph (B)(i);
       ``(III) the name and position of each employee described in 
     subparagraph (E)(iii);
       ``(IV) each notification carried out under subparagraph 
     (B)(ii); and
       ``(V) the results of each internal review initiated under 
     subparagraph (B)(iii); and

       ``(ii) make such records available to the Commission at the 
     request of the Commission.
       ``(3) Specified adult defined.--In this subsection, the 
     term `specified adult' means--
       ``(A) an individual age 65 or older; or
       ``(B) an individual age 18 or older who a registered open-
     end investment company or a transfer agent acting on behalf 
     of such company reasonably believes has a mental or physical 
     impairment that renders the individual unable to protect the 
     individual's own interests.''.
       (b) Recommendations.--
       (1) In general.--Not later than 1 year after the date of 
     the enactment of this section, the Securities and Exchange 
     Commission, in consultation with the entities specified in 
     paragraph (2), shall submit to Congress a report that 
     includes recommendations regarding the regulatory and 
     legislative changes necessary to address the financial 
     exploitation of security holders who are specified adults (as 
     defined in subsection (i)(3) of section 22 of the Investment 
     Company Act of 1940 (15 U.S.C. 80a-22), as added by this 
     section).
       (2) Consultation.--The entities specified in this paragraph 
     are as follows:
       (A) The Commodity Futures Trading Commission.
       (B) The Director of the Bureau of Consumer Financial 
     Protection.
       (C) The Financial Industry Regulatory Authority.
       (D) The North American Securities Administrators 
     Association.
       (E) The Board of Governors of the Federal Reserve System.
       (F) The Comptroller of the Currency.
       (G) The Federal Deposit Insurance Corporation.

     SEC. 3. DETERMINATION OF BUDGETARY EFFECTS.

       The budgetary effects of this Act, for the purpose of 
     complying with the Statutory Pay-As-You-Go Act of 2010, shall 
     be determined by reference to the latest statement titled 
     ``Budgetary Effects of PAYGO Legislation'' for this Act, 
     submitted for printing in the Congressional Record by the 
     Chairman of the House Budget Committee, provided that such 
     statement has been submitted prior to the vote on passage.

  The SPEAKER pro tempore. Pursuant to the rule, the gentlewoman from 
California (Ms. Waters) and the gentlewoman from Missouri (Mrs. Wagner) 
each will control 20 minutes.
  The Chair recognizes the gentlewoman from California.


                             General Leave

  Ms. WATERS. Mr. Speaker, I ask unanimous consent that all Members may 
have 5 legislative days within which to revise and extend their remarks 
on this legislation and insert extraneous material thereon.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentlewoman from California?
  There was no objection.
  Ms. WATERS. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I rise in support of H.R. 2265, the Financial 
Exploitation Prevention Act of 2021, sponsored by the gentlewoman from 
Missouri (Mrs. Wagner).
  It is not a surprise that adults over the age of 65 are sometimes the 
targets for financial exploitation and have become victims of financial 
crimes more than any other demographic. Just last week, in its annual 
report on elder fraud and abuse, the Department of Justice reported 
that in 2020 alone, seniors suffered over $1 billion in financial 
losses due to fraud.
  Unlike other adults, seniors are often dependent on their savings to 
support them in retirement, making any fraud that much harder to 
recover from. Brokers and investment managers, who often stand in as 
the stewards of the savings of seniors, are in a unique position to 
protect elders from financial crimes.
  In 2018, the Securities and Exchange Commission released a policy 
letter, called a no-action letter, stating that the Commission would 
not take an enforcement action against the agents of an investment 
company, including mutual funds, if the person paused a payment or 
redemption based on the suspicion of financial exploitation. This pause 
on cashing out the savings of a senior can provide invaluable time to 
ensure that the redemption is consistent with the will of the senior.
  H.R. 2265 would codify this SEC letter. It would also make two 
further changes to describe how a mutual fund adviser can establish the 
process at each fund to protect seniors.
  I thank Mrs. Wagner for working with my staff to craft the language 
in this bill. This is a helpful piece of legislation that will provide 
one more tool to market participants to protect investors and, in 
particular, our Nation's retirees.
  I urge Members to support H.R. 2265, and I reserve the balance of my 
time.
  Mrs. WAGNER. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I rise in support of my bill, H.R. 2265, the Financial 
Exploitation Prevention Act, a bipartisan bill

[[Page H5850]]

that will help us combat the financial exploitation of seniors and 
other vulnerable adults.
  I thank Congressman McHenry and Chairwoman Waters for supporting this 
important legislation.
  Financial exploitation of seniors and other vulnerable adults is a 
serious and growing problem.
  The number of Americans ages 65 and older is projected to nearly 
double, from 52 million in 2018 to 95 million by 2060. This represents 
an increase from 16 to 23 percent of the U.S. population being 65 years 
old and older.
  Right now, approximately 44 percent of households headed by a baby 
boomer and 30 percent of silent generation households own mutual funds.
  As more investors age into retirement, the risk of financial 
exploitation for elderly households only increases. Roughly one in five 
senior investors are victimized by financial fraud, and those investors 
lose an estimated $2.9 billion annually in reported cases and, 
unfortunately, some estimates indicate that only 1 in 44 cases of 
financial abuse is ever reported.

                              {time}  1730

  My bill proposes a solution to fight elder abuse in the context of 
mutual funds.
  Since some mutual fund shareholder accounts are held directly with a 
mutual fund and serviced by the fund's transfer agent, or ``direct-at-
fund'' accounts as they are known, the transfer agent is typically 
responsible for opening and servicing the accounts, maintaining account 
records, and serving as the fund's point of contact with those 
shareholders.
  Under current law, when a fund's transfer agent suspects financial 
exploitation in a direct-at-fund account, it cannot lawfully delay the 
disbursement of redemption proceeds while an investigation occurs.
  My legislation codifies a SEC-issued no-action letter from 2018 that 
permits a mutual fund and its transfer agents to delay the redemption 
period of a security if it is reasonably believed that a request was 
made by exploiting seniors or other vulnerable adults.
  This will provide our potentially vulnerable investors with an 
important layer of investor protection to help make sure that they 
receive the hard-earned savings that they have built up over the years.
  Additionally, and importantly, my bill also requires the SEC to 
report to Congress on additional potential legislative solutions on how 
to further combat financial exploitation of seniors and vulnerable 
adults.
  This legislation, Mr. Speaker, is needed to provide certainty to 
protect our seniors, and I strongly urge my colleagues to support the 
Financial Exploitation Prevention Act.
  I am grateful to the chairwoman and to the ranking member and all of 
the committee that has worked on this in such a bipartisan fashion, Mr. 
Speaker, and I reserve the balance of my time.
  Ms. WATERS. Mr. Speaker, I have no further Democratic speakers, and I 
reserve the balance of my time.
  Mrs. WAGNER. Mr. Speaker, I again, thank the chairwoman and her team 
for making this very important piece of legislation that is so 
important to our seniors and to our vulnerable adults happen.
  Again, in 2018, the SEC put this together as something we should be 
strongly looking at as we move forward. I am pleased we were able to 
bring it to the floor today in a bipartisan fashion.
  I urge all of my colleagues to support my bill, H.R. 2265, the 
Financial Exploitation Act of 2021, and I yield back the balance of my 
time.
  Ms. WATERS. Mr. Speaker, I yield back the balance of my time.
  The SPEAKER pro tempore. The question is on the motion offered by the 
gentlewoman from California (Ms. Waters) that the House suspend the 
rules and pass the bill, H.R. 2265, as amended.
  The question was taken; and (two-thirds being in the affirmative) the 
rules were suspended and the bill, as amended, was passed.
  A motion to reconsider was laid on the table.

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